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CONDITION RESTRAINING ALIENATION- CRITICAL ANALYSIS OF SECTION 10 OF THE TRANSFER OF PROPERTY ACT, 1882
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CONDITION
RESTRAINING ALIENATION- CRITICAL ANALYSIS OF SECTION 10 OF THE TRANSFER OF
PROPERTY ACT, 1882
AUTHORED BY - DR TANVEER KAUR
Abstract
Normally, while transferring a
property under the Transfer of Property Act, 1882 the transferor can impose
conditions on the transferee that are agreed upon by the parties. Section 10 of
the Transfer of Property Act, 1882 places certain limitations on this power of
the transferor to impose conditions on the transferee. This short article
closely looks at the section highlighting its rationale, essentials as well as
the scope. It also attempts to shed light on the two exceptions contained in
the second half of the provision.
The Transfer of Property Act, 1882
provides general rules for the transfer of both, movable and immovable
property. Sections 5-37 lay down general provisions for the transfer of both
types of property. However, post that the statute provides for specific rules
regarding transfer of immovable property only (barring a few provisions namely
Section 122-137). Under the architecture of the Transfer of the Property Act, an
immovable property can be transferred through sale, mortgage, lease, exchange
or gift. The focus on the present paper is on one of the general rules
regulating transfer of movable as well as immovable property i.e., Section 10.
Ordinarily, the parties can agree to
impose terms on the transfer that otherwise do not violate any law. That is
also what is contained in Section 7 of the Transfer of Property Act 1882 which
provides that a transferor can transfer a property ‘either absolutely or
conditionally, in the circumstances, to the extent and in the manner, allowed
and prescribed by any law for the time being in force’.[1]Therefore,
it is not in dispute that conditions on transfer can be imposed. Section 10
draws a line on what kind of conditions can be imposed.
As per the terms of Section 10 titled
‘condition restraining alienation’:
“Where property is transferred subject
to a condition or limitation absolutely restraining the transferee or any person
claiming under him from parting with or disposing of his interest in the
property, the condition or limitation is void, except in the case of a lease
where the condition is for the benefit of the lessor or those claiming under
him:
provided that property may be
transferred to or for the benefit of a woman (not being a Hindu, Muhammadan or
Buddhist), so that she shall not have power during her marriage to transfer or
charge the same or her beneficial interest therein.”[2]
The gist of the provision is that
while conditions or limitations can be imposed on the transfer, those
conditions or limitations that absolutely restrain the transferee from
alienating his interest are void. The rationale behind this is the policy of
the law favouring the circulation of property over its accumulation. The right
to transfer or alienate the property is integral to the ‘beneficial ownership
of property’ and therefore, any term of the transfer that takes away this right
is done away with by the law.[3] In
words of the Law Commission Report on the Transfer of Property Act, 1882:
“…if a person is free to dispose of
his own property, he must so exercise the freedom that those to whom he
transfers an interest in property are not deprived of that very freedom…… the
law requires that a person transferring property should not merely look to his
own immediate interests, but should also have regard to the interests of future
generations. In this sense, a balance is sought to be achieved between the
immediate present and the distant future—which is indeed a function of law as
social engineering”.[4]
Section 10 uses the word ‘absolutely’
which implies that not all restraints are hit by the provision. Courts have
held that partial restraints on the power of alienation with the transferee are
valid.[5]
According to the interpretation given by Courts, ‘the test is whether the
condition takes away the whole power of alienation substantially; it is a
question of substance and not of mere form”.[6]
There are different types of
restraints that can be imposed by the transferor. Restraints can be imposed
with respect to time, consideration, persons and use of property. If the
transferor imposes a condition on the transferee that he can sell that property
only to a particular person, the condition would fall within the purview of
Section 10. This is because it substantially impairs the right of alienation of
the transferee. [7]
However, if the restriction imposed
by the transferor directs the transferee to not sell outside the family, the
restriction will not be considered an absolute restraint. The Privy Council in
Mohammad Raza v. Abbas Bibi, ALR 59 I.A. 236 upheld the validity of a
restriction that created a limitation against transferring the property to a
stranger. It held that the same amounted to a partial restraint and was
therefore valid under Section 10 of the Transfer of Property Act 1882.
Likewise, if the condition places
fetters on the consideration that can be claimed by the transferee, the same
would be hit by Section 10. If the transferor puts a term in the transfer deed
directing the transferee to sell the property only at its market value, the
transferee is not bound to follow it. This is because it is transferee’s
prerogative to decide the amount of consideration for which he wants to sell
the property.
Transfer of Property Act 1882
specifically deals with 2 distinct types of conditions: condition precedent and
condition subsequent. As their names suggest, the former needs to be fulfilled
before a transfer can be effected while the latter comes to play after the
transfer is done. Section 10 deals with condition subsequent i.e., the
limitation or condition that it talks about are imposed after the transfer is
done. A significant consequence of this is that if the condition or the
limitation is held to be absolute then only the condition would be void. In
other words, the transfer would remain valid.[8]
There are 2 exceptions to Section 10.
First is the case of a lease. Lease by its very nature leaves some interest in
the hands of the lessor or transferor. Therefore, the transferer can put
restrictions on the lessee’s power to sub lease or assign under the lease.
Section 108 (j) which deals with the right of the lessee to ‘sub-lease the
whole or any part of his interest in the property’ is made subject to a
contract to the contrary to reflect this. Lease is also exempted in Section 12
which again talks about limitations on alienation.[9]
The second exception is made in the
case of married women, not being Hindu, Muslim or Buddhist. The effect of the
exception is that property can be transferred to such a woman with the
condition that she would not transfer the same during her marriage.[10]This
exception was retained in the backdrop of a common law rule that a woman’s
property became her husband’s on marriage.
The patriarchal rule was abrogated by
the Indian Succession Act, 1865 for all marriages taking place after 1st
January 1866. By the doctrine of
‘separate use’, property could be settled so that she could hold it in a manner
as if she was unmarried. In this context, the exception was ‘designed to
protect her against herself by putting it out of her power to sell or incumber
the corpus’.[11]However,
in light of the ‘growing social consciousness in the country’ as well as the
rise in literacy of Christian and Parsi women,[12]
the Law Commission of India has recommended its removal twice, in its 66th
as well as 70th report. [13]
[1] Transfer of Property Act 1882, s7.
[2] ibid s10.
[3] Mulla, The Transfer of Property
Act 1882 (13th edn)
[4] Law Commission of India, The
Transfer of Property Act, 1882 (Report No. 70, 1977) Ch XVII.
[5] Poonam Pradhan Saxena, Property
Law (3rd edn, Lexis Nexis 2017)
[6] Shephard and Brown, Commentaries
on the Transfer of Property Act 1882 (4th edn, Lawrence Asylum
Press 1899).
[7] Saxena (n5).
[8] ibid.
[9] Brown (n6).
[10] Saxena (n5).
[11] Brown (n6).
[12] Law Commission (n4).
[13] ibid para 17.37.
Article Information
CONDITION RESTRAINING ALIENATION- CRITICAL ANALYSIS OF SECTION 10 OF THE TRANSFER OF PROPERTY ACT, 1882
Authors: DR TANVEER KAUR
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/01/02
- Issue 7
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International Journal for Legal Research and Analysis
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